Rachel Reeves is breaking records for the UK’s finances.... in all the wrong ways

The billions Labour has thrown at public sector unions are now showing up in the national accounts

Montage © Facts4EU.Org 2024

Facts4EU breaks down the latest figures for the UK’s rocketing deficit and debt and puts it all in layman’s language

The latest official figures from the Office for National Statistics on the state of the nation’s finances as at the end of October will have made for grim reading in No.11 Downing St, home to the country’s new Chancellor of the Exchequer, the Rt Hon Rachel Reeves MP.

Below we summarise the latest data from the ONS, attempt to put it in layman’s language, and pull out some key conclusions. The results for the embattled Rachel Reeves - under attack from pensioners, farmers, small businesses, and from those who believe a CV should reflect someone’s actual job experience – are alarming.

Brexit Facts4EU.Org Summary

Government debt and deficit – the stark facts for Rachel Reeves

Monthly borrowing : second-highest October figure since records began over 30 years ago
Current deficit : second-highest October figure since records began 26 years ago
Debt interest : Highest since records began 26 years ago
Public sector net debt (excluding public sector banks) : 97.5% of GDP – a level last seen in the early 1960s

[Source: Office for National Statistics, Nov 2024.]

Public sector net debt – The main measure of the UK’s financial health

To quote the Office for National Statistics :

“The most widely used balance sheet measure used to describe the UK public sector’s financial position at a point in time is public sector net debt excluding public sector banks (PSND ex).”
- ONS, 21 November 2024.

Brexit Facts4EU.Org Summary

Our national debt continues to rise, as a percentage of GDP

[Source: Office for National Statistics, Nov 2024.]

Quoting the ONS again

“Expressing net debt as a ratio of gross domestic product (GDP) gives an estimate of its affordability and provides a more thorough and reliable measure for comparison of the UK’s fiscal position over time.
“The net debt-to-GDP ratio at the end of October 2024 was provisionally estimated at 97.5%, 1.6 percentage points higher than a year ago.”
- ONS, 21 November 2024.

Pre-Covid the UK had a respectable (if nevertheless too high) net debt of 80% of GDP. The Covid measures made this rise dramatically. Now the new Labour Government’s measures are predicted to take our net national debt above 100%, according to the Office for Budget Responsibility.

The impact of the Labour Government throwing money at its union paymasters

The ONS is quite clear about this.

“Central government departmental spending on goods and services increased by £2.5 billion to £36.9 billion, as pay rises and inflation increased running costs.”
- ONS, 21 November 2024.

The impact of the new Government’s huge pay rises granted to the public sector, train drivers and the like, is certain to push spending much higher in the next year.

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These troubling figures in detail – and with some simple explanations

The public sector once again spent more than it received in taxes and other income in October 2024. Government borrowing is the difference between public sector spending and income. Rachel Reeves was required to borrow £17.4 billion. This is the second highest October borrowing since monthly records began in January 1993.

The current budget deficit refers to borrowing to fund day-to-day public sector activities. It was £12.7 billion in October 2024, £0.4 billion more than in October 2023 and the second highest October deficit since monthly records began in April 1997.

The interest we are all paying on central government debt interest was £9.1 billion in October 2024, £0.5 billion more than in October 2023 and the highest October figure since monthly records began in January 1997.

Public sector net debt excluding public sector banks was provisionally estimated at 97.5% of GDP at the end of October 2024 – perilously close to 100%. This was 1.65% higher than at the end of October 2023, and remains at levels last seen in the early 1960s.

Finally, the Government’s net cash requirement (excluding UK Asset Resolution Ltd and Network Rail) was £19.7 billion in October 2024, £1.6 billion more than in October 2023.

The Bank of England has contributed massively to this increase in our indebtedness

In Part II we will look at the culpability of the Bank of England and the simply enormous losses it has incurred for the country as a direct result of its policies. This makes the Bank an outlier. Neither the Fed nor the ECB have pursued the same policies.

Putting it simply, the country is losing enormous amounts of money as a result of the policies of the Bank of England. To explain what the Bank has been doing and why the Bank’s losses are so high, we turned to the man who led the charge against this in Parliament.

And no, it's not the man on the right who is Andrew Bailey, current Governor of the BoE.

Readers will get the full shocking story in Part II.

Observations

Borrowing to invest is good, borrowing to fund outrageous public sector pay settlements is not

The country's level of net public debt as a proportion of GDP soared because of the steps taken during Covid. The problem is that this has not only stayed at its significantly higher level, it has continued to increase. The OBR expects the Labour Government's new measures to take this above the 100% level and our chart certainly shows this trend.

Our figures are the latest available and show the position up to the end of last month (October). The problem is that whilst the impact of some of the early giveaways to public sector unions and others in the form of enormous pay settlements way above inflation are beginning to show, the majority of increased government spending has yet to be felt. As these start to show through in the coming months it appears certain that the debt-to-GDP ratio will break the totemic 100% level.

Both the German and French governments are struggling to reduce public spending as a matter of urgency. In the UK the government of Sir Keir Starmer and Rachel Reeves seems determined to increase spending to hitherto unheard-of levels - at least since the Second World War. Watch this space.

Next...

We are currently researching a follow-up report on the contribution the Bank of England is making to the appalling numbers. That report focuses on the losses the Bank is making by virtue of it pursuing an illogical policy of deliberately losing money on its activities in the bond markets. We are endeavouring to explain this in layman's language, as the sums involved are extraordinary and the public should be told. Again, watch this space...

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[ Sources: Office for National Statistics: Public Sector Finance Delivery team ] Politicians and journalists can contact us for details, as ever.

Brexit Facts4EU.Org, Tues 26 Nov 2024

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Reader Comments 8

1. Old Albion , Tuesday, November 26, 2024, 08:22:

Labour government gets elected. Economy gets trashed. Who'd a thought it ............................

2. Ashley Great Britain , Tuesday, November 26, 2024, 08:32:

1 old Albion.
-
We knew they would be bad but it's very concerning how quickly and deeply they have done it.
Who on earth would vote for Labour?

3. Northern Muppet , Tuesday, November 26, 2024, 08:50:

Probably sparkless??

4. LuxuryBalloon , Tuesday, November 26, 2024, 08:54:

UK’s debt in 2016 was 87% of GDP.
In March 2023, UK’s dept was 101% of GDP.
In Sep 2024, UK debt to GDP was 99% of GDP.

5. NH , Tuesday, November 26, 2024, 12:26:

4. LB
You are focussing on the wrong figures !
How can the Labour Gov possibly have had a major effect on UK debt after only 5 months and only one month after their first budget ?
.
The first major rise in UK debt occurred after Labour's financial crash when the Conservatives inherited a deficit of over 10% of GDP. By 2016 they had reduced the deficit to 4.5% but obviously the debt increased while they were doing this. The second major increase was during the Covid crisis which added a huge amount to UK debt for obvious reasons. The Conservative plans were to gradually reduce the debt but the Labour party has reversed these plans.
.
The Labour Party decided to increase public sector salaries and pensions significantly and to pay for this with plans which will be inflationary, reduce investment, reduce economic growth, reduce Gov income and lead to higher unemployment. They have also decided to increase UK debt by changing the definition of what UK debt is. The result is the cost of Gov borrowing has increased significantly (higher than after the Liz Truss budget), business confidence is extremely low and the Government is running policies which are having the opposite effect of the BOE's policies which will maintain inflation.
.
However it could be worse, according to reports Marine Le Penn is considering creating another euro crisis by rejecting the French Budget and bringing down the French Government down.

6. Ashley Great Britain , Tuesday, November 26, 2024, 12:33:

So it's not Liz Truss but Rachel Reeves who has crashed the economy! Good old labour.

7. Adam Hiley , Tuesday, November 26, 2024, 17:52:

This awful Government must be forced out sign the petition We cannot allow the likes of Starmers amateurish Government to continue to deny Britons democracy at Home but lecturing Foreigners about Democracy no-one I know wanted Labour even though I wanted Sunak's team out

8. Adam Hiley , Tuesday, November 26, 2024, 17:55:

I don't see this Labour Government lasting anywhere near 4 years I think We could see another election next Spring or Summer there's no way back for them to recover

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